A ‘Company’ is an association of persons, incorporated under The Indian Companies Act, 1956 or any other previous act. It is an artificial person having a separate legal entity, i.e. its identity is distinct from its members (who subscribe the memorandum of association of the company and whose name has been entered in the register of members) with limited liability. The company has a common seal, perpetual succession and it can sue and be sued in its own name.
There are some companies registered under this act, some of them are public limited company while others are a private limited company. The difference between public and private company is given as under:
Content: Public Ltd. Company Vs Private Ltd. Company
|Basis for Comparison||Public Company||Private Company|
|Meaning||A public company is a company which is owned and traded publicly||A private company is a company which is owned and traded privately.|
|Minimum paid up capital||5,00,000||1,00,000|
|Start of business||After receiving certificate of incorporation and certificate of commencement of business.||After receiving certificate of incorporation.|
|Issue of prospectus / Statement in lieu of prospectus||Obligatory||Not required|
|Public subscription||Allowed||Not allowed|
|Quorum at AGM||5 members must present in person.||2 members must present in person.|
|Transfer of shares||Unrestricted||Restricted|
Definition of Public Ltd. Company
A Public Limited Company or PLC is a joint stock company formed and registered under The Indian Companies Act, 1956 or any other previous act. It is an association of persons formed voluntarily, having a minimum paid up capital of Rs. 5,00,000.
There is no defined limit on the number of members the company can have. Also, there is no restriction on the transferability of the shares. The company can invite the public for the subscription of shares or debentures, and that is why the term ‘Public Limited’ gets added to its name.
Definition of Private Ltd. Company
A Private Limited Company is a joint stock company, incorporated under The Indian Companies Act, 1956 or any other previous act. It is an association of persons formed voluntarily, having the minimum paid up capital of Rs. 1,00,000. The maximum number of members is 50, excluding the current employees and the ex-employees who were the members during their employment or continues to be the member after the termination of employment in the company.
The company restricts the transfer of shares and prohibits invitation to the public for the subscription of shares and debentures. It uses the term ‘private limited’ at the end of its name.
Key Differences Between Public and Private Ltd. Company
The difference between public and private company can be drawn clearly on the following grounds:
- The public company refers to a company that is listed on a recognised stock exchange and traded publicly. A Private Ltd. the company is one that is not listed on a stock exchange and is held privately by the members.
- There must be at least seven members to start a public company. As against this, the private company can be started with minimum two members.
- The is no ceiling on the maximum number of members in a public company. Conversely, a private company can have a maximum of 100 members, subject to certain conditions.
- A public company should have at least three directors whereas the Private Ltd. company can have a minimum of 2 directors.
- It is compulsory to call a statutory general meeting of members, in the case of a public company, whereas there is no such compulsion in the case of a private company.
- In a Public Ltd. Company, there must be at least five members, personally present at the Annual General Meeting (AGM) for constituting the requisite quorum. On the other hand, in the case of a Private Ltd. Company, that number is 2.
- The issue of prospectus/statement instead of the prospectus is mandatory in case of a public company, but this is not the case with the private company.
- To start a business, the public company needs a certificate of commencement of business after it is incorporated. In contrast, a private company can start its business just after receiving a certificate of incorporation.
- The transferability of shares of a Pvt. Ltd. company is completely restricted. On the contrary, the shareholders of a public company can freely transfer their shares.
- A public company can invite the general public for subscribing shares of the company. As opposed, a private company has no right to invite public for subscription.
After discussing these two entities, it is very clear that there are so many aspects which distinguish them. Apart from the above-mentioned differences there are many other differences like, a public company can issue share warrant against its fully paid share to the shareholders, which a private company cannot.
The scope of a Private Ltd. The company is limited, as it is limited up to a few number of people, and enjoys less legal restrictions. On the other hand, the scope of a Public Ltd. company is vast, the owners of the company can raise capital from the general public and have to abide by several legal restrictions.